18 20 21 Income Distribution / Development

Question 1

Compensating Differentials

Answer 1

Differences in wages resulting from differences in working conditions. Risky/Not fun jobs get paid more.

Question 2

Property Income

Answer 2

Income from ownership of rental properties, stocks, bonds, etc.

Question 3

How to distribute the income?

Answer 3

Transfer payments to the poor, medicare, medicaid, free school, Social Security, public assistance, and food-stamps.

Question 4

How to measure inequality?

Answer 4

Lorenz Curve [banana looking thing], Gini Coefficient [ratio of space in the banana vs under banana]. More unequal is closer to 1.

Question 5

Poverty Line

Answer 5

Officially established income that separates rich from poor. Three times the amount it costs to survive according to department of ag.

Question 6

Why should we not distribute the wealth?

Answer 6

1. People are entitled to what they produce, therefore the frree market is fair. 2. Taxes reduce the incentive to work, take risks. 3. It is not very effective, there is lots of waste.

Question 7

Is trade a good idea and why?

Answer 7

Yes always because of comparative advantages even if there are absolute advantages. Everyone gets cheaper stuff and thats that.

Question 8

Why do protection?

Answer 8

“saves jobs” “other countries are unfair” Only semi-legit reason is for infant industries that need temporary protection though even this is a stretch.

Question 9

Why do poor countries stay poor?

Answer 9

Don’t have any money to invest. All the smart people leave to maximize their utility in other countries. There aren’t well defined property rights.

Question 10

What works to make countries more rich?

Answer 10

Deregulate and trade more. Privatize things, have good institutions.